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'Buy' SATS ahead of air travel recovery: DBS

Jeffrey Tan
Jeffrey Tan • 2 min read
'Buy' SATS ahead of air travel recovery: DBS
DBS Group Research has selected in-flight caterer SATS as one of its top picks.
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As the worst appears to be over for regional air travel, DBS Group Research has selected in-flight caterer SATS as one of its top picks.

The brokerage says it is “increasingly optimistic” that commercialisation of at least two Covid-19 vaccines in 2021 should help air travel recover to pre-Covid-19 levels at an earlier date compared to the International Air Transport Association’s forecast range.

See also: Singapore to get first batch of Covid-19 vaccines in early 2021

Moreover, passenger throughputs have bottomed and are recovering albeit at a gradual pace, it says.

This comes as countries in the region have inked international travel arrangements to facilitate necessary travel along with a pick-up in domestic travel demand.

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This is despite the postponement of the air travel bubble between Singapore and Hong Kong that was initially scheduled to begin on Nov 22.

“We see SATS as a candidate for vaccine recovery play,” analysts Alfie Yeo, Siti Ruzanna Mohd Faruk, Nantika Wiangphoem and Paul Yong write in a note dated Nov 20.

According to DBS, the stock is currently trading at 21 times its FY23 earnings forecast.

The brokerage expects the stock to gradually re-rate back to pre-Covid-19 levels.

“We advocate accumulating and staying vested ahead of the recovery even though near-term valuations look high,” the analysts say.

DBS has a “buy” rating for the stock with a target price of $4.50.

As at 11.56 am, SATS was down 16 cents or 3.7% at $4.22 with 6.5 million shares changed hands.

See also: PhillipCapital upgrades SATS to 'neutral' with TP of $4.40 amid expectations of muted air travel in FY2021

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